GLOBE’S NET PROFIT DROPPED FOR 2017

Globe Telecom is the largest mobile operator in the Philippines. Despite a year-on-year 6% increase in its service revenue, net profit dropped 5% to P2.1 billion. The company said that the decrease is attributed to its increased investments in data network therefore increasing its non-operating expenses and depreciation charges. Non-operating expenses increased to 2% largely due to increase in interest expenses and spectrum amortization related to the San Miguel Corp. (SMC) telco asset acquisition. For 2017, the company basically posted a 5% decline in net income to P15.1 billion.

Globe’s President and CEO Ernest Cu expressed that despite the decline in the company’s bottom line figure, they are confident that the expenses made for its investment in improving their services will all translate into bigger profits in the future because the very objective of the company is to make a foundation for sustainable long-term growth and shareholder value.

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Revenue from mobile date continues to grow

Reviewing 2017 again for Globe, it actually garnered a 7% year-on-year increase to P25.4 billion in the fourth quarter mainly driven by the continued growth in mobile data, which increased to 23% to P11.7 billion. What accounted mostly of its total mobile revenue was from mobile data which stood at 44%, up from the 38% in the fourth quarter of 2016. SMS revenue was flat which mobile voice fell 5%. For its home broadband revenue, it increased by 7% while its corporate data business recorded 5% growth. Overall, its consolidated revenue rose by 6% to P127.9 billion which the company claims to be the highest ever for the full year. The sustained momentum was also driven by the solid growth in data-related products brought about by the increasing popularity of streaming on demand video content.

Mobile subscriber base has decreased

Globe’s mobile subscriber base decreased by 3% which stood at 60.7 million from 62.8 million reported a year ago due to a change in how it reports prepaid subscribers beginning 2017. From the 120-day cut-off on prepaid subscribers who did not reload, it has now been changed to 90 days which significantly changed the report of current subscribers. By the end of December, Globe had a 50.5% market share based from the data collected by GSMA Intelligence.

Globe will spend more this to upgrade data networks

The company’s CAPEX increased by 16% with 82% of it allocated to upgrading its data networks. Despite the budgeted expenses, the company still expects a single-digit growth in its revenue this year. Cu is confident that despite the dip in its net income, its continued investment in network data capacity and coverage will allow them to provide superior customer experience and improve over-all connectivity to sustain long-term growth and also maximizing shareholder’s wealth.

Technicals

Globe has been bearish way before this announcement. So if ever there would be even bigger price movements downward this should not be a surprise to you because a bearish stock will continue to go down until proven otherwise. From a technical aspect, globe start its downtrend last June 2017 and from that time on it has not shown any signs of reversal.

What made things worse for the stock is it broke down from the strong support at 1,955. The breakdown from that price range opened up a larger opportunity for decline for the stock. As of this point we do not have any bug signals for position traders due to the fact that it is bearish.

For quick traders, the stock has started to consolidate for the short term from 1,680 to 1,905. So the downward movement that you are seeing today would happen regardless also of the bad earnings report of Globe due to the fact that the stock failed to break the resistance at 1,905. Whatever downward movement we are seeing today is due to the fact that the resistance was not broken. Should this continue the stock could drop further and retrace to 1,680. Should the stock bounce from that level, quick traders can buy at 1,680 and sell at 1,905!

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